Find Draws Illinois Basin Attention

Just on the outskirts of Stephen A. Forbes
State Park in Marion County, Illinois, a high-tech oil well nestled
on secluded land owned by the First United Methodist Church of Kinmundy
is making history.

The discovery well has tapped what appears to be
the largest modern oil find in Illinois — and perhaps the largest
per area discovery in the state's history.

And perhaps even more importantly, the discovery
could touch off a new era of drilling in the mature Illinois Basin.

This new field is a Silurian pinnacle reef structure,
and it's likely there are additional reefs hidden beneath the traditional
shallow production throughout the basin, according to Charles W.
Wickstrom, vice president of exploration for Tulsa-based Ceja Corp.

Ceja's exploration niche focuses on plays that require
seismic, and the firm first went to Illinois in 1978 using deep-
hole dynamite seismic acquisition techniques in its search for Silurian
reefs, but the only bright spot in the effort was the discovery
of the Miletus Field, a shallow Mississippian-age field that has
produced for years and is currently on secondary recovery.

For the Silurian play, after 13 dry holes the company
decided to move on.

Now, more than 20 years after Ceja first sought Silurian
reefs in Illinois, the company has firmly established the impressive
potential of these structures.

Wickstrom, who rejoined Ceja in 1995 after a nine-year
hiatus, began reprocessing with new technologies and techniques
all the firm's old seismic data.

"This reprocessing program imaged a deep structure
under the Miletus Field that we had been unable to see before —
with the new processing techniques the reef structure is very obvious,"
Wickstrom said. "In 1996 we deepened an existing well in the field
to test the reef, and that well produced about 70 barrels of oil
a day."

Following that well, Ceja acquired an eight-square-mile
3-D survey over the field and began developing the deeper structure.

Ceja has drilled 15 wells to that deeper reef in
the Miletus Field, with development still under way. The firm is
producing 2,000 barrels of oil a day from the 320-acre reef, and
ultimate reserves will likely be five to six million barrels of
oil.

Wickstrom said the new production was so economic
that during the last 1990s price collapse the field was a financial
savior.

"We are developing the field in a manner that will
conserve as much reservoir energy as possible," he said, "depleting
the reservoir from the bottom up to maximize ultimate recoveries."

First
Steps

That deeper Miletus production is impressive, but
perhaps the most important element of that venture is the experience
and confidence it gave Ceja to renew its search for Silurian reefs.

Just on the outskirts of Stephen A. Forbes
State Park in Marion County, Illinois, a high-tech oil well nestled
on secluded land owned by the First United Methodist Church of Kinmundy
is making history.

The discovery well has tapped what appears to be
the largest modern oil find in Illinois — and perhaps the largest
per area discovery in the state's history.

And perhaps even more importantly, the discovery
could touch off a new era of drilling in the mature Illinois Basin.

This new field is a Silurian pinnacle reef structure,
and it's likely there are additional reefs hidden beneath the traditional
shallow production throughout the basin, according to Charles W.
Wickstrom, vice president of exploration for Tulsa-based Ceja Corp.

Ceja's exploration niche focuses on plays that require
seismic, and the firm first went to Illinois in 1978 using deep-
hole dynamite seismic acquisition techniques in its search for Silurian
reefs, but the only bright spot in the effort was the discovery
of the Miletus Field, a shallow Mississippian-age field that has
produced for years and is currently on secondary recovery.

For the Silurian play, after 13 dry holes the company
decided to move on.

Now, more than 20 years after Ceja first sought Silurian
reefs in Illinois, the company has firmly established the impressive
potential of these structures.

Wickstrom, who rejoined Ceja in 1995 after a nine-year
hiatus, began reprocessing with new technologies and techniques
all the firm's old seismic data.

"This reprocessing program imaged a deep structure
under the Miletus Field that we had been unable to see before —
with the new processing techniques the reef structure is very obvious,"
Wickstrom said. "In 1996 we deepened an existing well in the field
to test the reef, and that well produced about 70 barrels of oil
a day."

Following that well, Ceja acquired an eight-square-mile
3-D survey over the field and began developing the deeper structure.

Ceja has drilled 15 wells to that deeper reef in
the Miletus Field, with development still under way. The firm is
producing 2,000 barrels of oil a day from the 320-acre reef, and
ultimate reserves will likely be five to six million barrels of
oil.

Wickstrom said the new production was so economic
that during the last 1990s price collapse the field was a financial
savior.

"We are developing the field in a manner that will
conserve as much reservoir energy as possible," he said, "depleting
the reservoir from the bottom up to maximize ultimate recoveries."

First
Steps

That deeper Miletus production is impressive, but
perhaps the most important element of that venture is the experience
and confidence it gave Ceja to renew its search for Silurian reefs.

"The Miletus Field is just north of the Stephen A.
Forbes State Park, and we had always been interested in shooting
seismic over the park but had been denied surface access," Wickstrom
said.

But since the company's first efforts in the 1970s
the state of Illinois consolidated its Department of Mines oil and
gas division into the Department of Natural Resources (DNR), which
provided a level of expertise about oil and gas operations with
the DNR.

"Consequently, we were able to convince state officials
to allow us to shoot seismic along an existing abandoned pipeline
right-of-way through the park," Wickstrom added.

Ceja shot the 2-D seismic in October 2000 and the
data imaged part of a deep structure. While discovery of the structure
was exciting, it was still under a state park where no oil and gas
operations were allowed.

Ben Webster, president of project partner Deep Rock
Energy, had a local attorney do a title and deed research in the
area. He uncovered over 140 private mineral leases still held by
individuals that the state failed to condemn when the park was established.

A joint venture between Deep Rock Energy as the operator
and Ceja's managed partners was established and Ceja leased those
mineral rights. The company then went to the DNR and requested that
the state do a voluntary integration of the state's mineral interests
with its private ownership with the stipulation that it would do
no surface occupancy within the park.

"The DNR also granted permission to shoot 3-D seismic
in the park," Wickstrom said, "as long as we didn't cut down any
trees larger than six inches in diameter."

A Team Approach

Ceja's own seismic crew shot 90 percent of the eight-mile
3-D seismic survey using hand carried cables and a single vibrator
truck along the extensive horse trails and existing rights of ways
in the park. The data successfully imaged the reef under the park
and the 585-acre lake in the park.

"With that data in hand we had public hearings and
presented our information to the state," Wickstrom said. "Officials
agreed to form two special drilling units — one north of the park
and one southwest of the park."

Of course, the stipulation to not drill on park land
meant horizontal drilling technology was necessary. However, to
obtain additional downhole information prior to attempting an expensive
horizontal well the joint venture re-entered an old well 300 feet
north of the park on acreage held by shallow production that was
part of the original development of the Miletus Field.

"Based on the 3-D seismic data we knew we had a reef
similar to the one just north in the Miletus Field," he said. "However,
we didn't know whether we had porosity or oil.

"We could see that part of the reef extended just
beyond the edge of the park boundary where we had an old shallow
well," he said. "We re-entered that old well to get a true top on
the structure and to get a good velocity to depth."

Ceja was able to core the zone to determine that
we did indeed have reef rock and there was oil present.

"That well was completed producing 400 barrels a
day for $300,000," Wickstrom added, "and it gave us a lot of confidence
prior to drilling a $1.5 million horizontal well."

Deep Rock and Ceja assembled a team of experienced
companies to work on the horizontal project:

Weatherford Controls brought a crew from Canada to aid in drilling
the well under balanced.

The partners knew under balanced drilling was going
to be important based on unsuccessful drilling by other companies.
A horizontal well drilled into a reef under Carlisle Lake in Illinois
on federal leases did not drill under balanced, and when the well
drilled into the reef it was so porous it took all the mud, leaving
no fluid in the hole.

The operator wasn't ready for the oil that started
flowing.

"We set our intermediate casing through the curve
to within a foot of penetrating the reef using mud," Wickstrom said.
"We then took the mud out of the hole and using diesel drilled out
into the reservoir. That should have kept us at about 40 pounds
under balanced, but cuttings kept the weight of the diesel over
pressured, so we were able to drill only about 220 feet into the
reef before we started getting a lot of cuttings built up in the
hole."

The drillers attempted to reduce the weight by injecting
nitrogen into the hole, but as soon as nitrogen came back to the
surface the well started flowing gas and oil.

Deep Rock and Ceja decided to terminate the Warren
No. 1 at that point since they were getting impressive oil flows
from the Geneva B formation.

"We only drilled 220 feet into the reservoir, but
we had such prolific production tests that we decided to stop,"
he said. "The well was completed in March for 2,000 barrels of oil
a day flowing, but production is currently up to 3,000 barrels daily
and it is choked down."

It was drilled from the northeast corner of the field
with a total vertical depth of 3,850 feet and a measured depth of
about 5,000 feet.

Going Out

Following the success of that well the companies
moved to the southwest corner of the park and re-entered an old
well. The Carter No. 1 achieved a 400-foot horizontal leg in the
Geneva B pay zone and is currently awaiting construction of a tank
battery.

"We drilled that well under balanced the whole way,
so we were actually producing oil and gas on a controlled basis
while we were drilling, Wickstrom said.

"We have run a production test and this will be another
prolific well."

Illinois law limits drilling to one well per horizon
on special drilling units, so these will be the only two wells to
the Geneva B. The joint venture will now move to the field's northwest
corner (Warren special drilling unit) and the east side on the Carter
special drilling unit and drill to the Geneva A.

Both wells will have half-mile long horizontal legs.

Currently Deep Rock Energy and Ceja are conducting
reservoir and reserve analysis studies, so there is no published
reserve figure for the reef — but Wickstrom said this will be a
multi-million barrel field.

Ultimate life of the field is expected to be five
to 10 years. Rock Creek Energy and Ceja also are conducting shut-in
pressure tests and draw down pressure tests on the two wells to
determine the most efficient means of production to maximize ultimate
recovery.

"We want to make sure we keep a low pressure draw
down across the wellbore so we're not over producing the reservoir,"
Wickstrom said. "We've seen in other areas of the basin where companies
have tried to produce too fast, and it's been detrimental to the
reservoir."

The two companies are getting more comfortable with
the horizontal technology.

"Keeping the drilling fluid under balanced was the
key to getting further out on the second wel,l and we have continued
to move up the learning curve," he said.

In addition to traditional horizontal drilling tools
such as measurement while drilling and geosteering, the seismic
data has been critical in the drilling process.

"Landing the horizontal leg precisely within these
relatively thin zones is vital," he said. "We loaded the 3-D seismic
data on a laptop, and using seismic vision systems we can assess
the location of the drillbit in relation to the structure maps.

"As you pick up new drill tops, you can correct the
seismic to the actual drilling depth, helping to hit a target that's
only six feet wide."

The Beautiful Stacked Pays

Ceja will be acquiring a high-resolution 3-D seismic
program later this year to better delineate the reef structure.

"During the initial 3-D survey we were constrained
by the line spacing," Wickstrom explained. "We have developed a
good working relationship with the park's management and this time
plan to use closer lines, more channels and a bigger system so we
can image the shallower horizons."

Each of these special drilling units may have six
to eight different productive horizons.

"These stacked pays are the beauty of the Illinois
Basin," he continued. "They saved us years ago at the Melitus Field,
where we drilled deep but found shallow pay that held all the acreage
until we had the technology to image the deeper formations."

The two companies also are looking at various ways
to capture the field's significant associated gas stream to fuel
the micro-turbines that are being installed for energy needs at
the wellsites. They're also working with the local utility on a
deal that would provide electricity to the park.

"We can stack these micro-turbines side by side and
generate 30 kilowatts per hour per each micro-turbine," Wickstrom
said. "This way we can use this resource rather than flare the gas."

Ceja's success in the two deeper Silurian reefs could
spur renewed interest in the hunt for deeper reefs throughout the
Illinois Basin.